Recording and reporting business expenses is a missed opportunity for many business owners and employees. Much of what you spend for business purposes is tax-deductible. Knowing whether you can or can't expense a purchase for business purposes can be difficult. Nevertheless, here are a few general guidelines to help.
According to the IRS, business expenses must be ordinary and necessary to be deductible. That means they are normal and recognized in your business, as well as helpful and appropriate. You'll need to keep records (such as statements and ledgers) and supporting documents (receipts and invoices) to verify your deductions. Some expenses are subject to extra requirements, as described below.
Travel expenses pertain to business trips and can include transportation to and from airports, your hotel and business meeting places. They also generally include lodging, meals, tips and other related incidentals.
Entertainment expenses need to be either directly connected to or related to the conduct of your business. That means that business is the foremost purpose of the activities and it's very probable you'll get income or future business benefits as a result. Expenses from entertainment that aren't considered directly related may still be deductible if they are associated with your business and occur just before or after a significant business conversation.
Business use of your personal car is calculated according to your actual business-related expenses, or by multiplying your business mileage by the prescribed IRS rate (53.5 cents per mile in 2017).